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The taxman gets a bite of everyone’s income, and he is definitely coming for the sweet fruit of your investments: those juicy returns. That winning stock pick or high-yielding bond may eventually come with a big tax bill attached.
“The good news is you made money and the bad news is you have to pay tax on it,” says Michael Masiello, president of Masiello Retirement Solutions in Rochester, New York.
Luckily, there are strategies to defer the inevitable tax sting or even avoid taxes altogether in some cases. How? Simply by strategically planning what type of account certain investments are placed in.
“Quite often you can make as much or more money saving taxes on investments as you can investing more aggressively to make money,” says Michael Silver, CFP professional and partner at Baron Silver Stevens Financial Advisors in Boca Raton, Florida.
Investors just need to understand the types of tax-advantaged accounts available to them and how the returns from their investments are taxed.